Fuel Supply Estimate Gives Satmex Extra Time for Satellite Rollover

[Satellite News 11-21-11] Mexican satellite fleet operator Satmex confirmed that an electric propulsion defect discovered on its Satmex 5 satellite, located at 116.8 degrees West, would cut its service life short. In its latest quarterly financial results issued Nov. 17, Satmex said it expects the satellite to provide service until December 2012, by which the transition of service to its new Satmex 8 satellite is expected.

Satmex 8 is currently under construction by Space Systems/Loral (SS/L) and scheduled for delivery to International Launch Services (ILS) in July and launch on a Proton rocket the following month. The new satellite will add 40 Ku-band transponders and 24 C-band transponders to Satmex’s offering in its core Latin American market.

Speaking on conference call, Satmex CEO Patricio Northland said the operator’s most recent assessment of Satmex 5 came after its manufacturer Boeing Space and Intelligence Systems completed a fuel-supply estimate. Boeing found that the damaged satellite could continue operations for 10 weeks more than originally expected. Northland said the extra time is critical.

“This gives us a high level of comfort that we will be able to transfer all Satmex 5 customers to Satmex 8,” Northland said. “SS/L may be able to deliver Satmex 8 before its July 1 deadline. Timing is important for the rollover to Satmex 8. We will now have five months where both Satmex 8 is in operational orbit and Satmex 5 will no longer be able to support its existing customers.”

Satmex estimates that the Satmex 8 satellite’s total cost will be about $317 million, including construction, launch and insurance for the first year in orbit. The company paid SS/L about $2.6 million to begin planning a potential Satmex 7 satellite. The contract, which is set to expire at the end of 2012, was recently renewed with Satmex’s Alterna TV subsidiary. Northland said that while Satmex intends to build Satmex 7, a contract schedule would not be disclosed at this time.

Satmex emerged from bankruptcy in May with a $325 million, 9.5 percent annual interest loan. The principal payment is due in May 2017. Northland said the operator’s bankruptcy proceedings in both the United States and Mexico alleviated Satmex of a majority of its debt.

The operator reported a 1.5 percent decline in satellite lease revenue during the first three quarters of 2011 ending Sept. 30 at $78.2 million. Total 2011 third quarter revenues were flat compared with the same period last year at $96.2 million. The combined fill rate for Satmex 5 and the Satmex 6 satellite located at 113 degrees West is about 94 percent. Satmex maintained $104 million in cash reserves as of Sept. 30.

Satmex proposed to de-orbit its Solidaridad-2 to a graveyard orbit out of the geostationary arc. According to Satmex’s Nov. 17 filing with the U.S. Securities and Exchange Commission (SEC), the Mexican government is conducting its own estimate of how long the satellite can be operated. Solidaridad 2, used by the Mexican government for L-band mobile services, has been operating in an inclined orbit to save fuel. The satellite’s L-band capability allows it to maintain communication links while functioning in the alternative orbit.

In a previous interview with Satellite News, Satmex Vice President of Business Development Clemente Cabello said the operator, which has recently had trouble meeting present demand in Mexico, is hoping to bounce back in other countries in the region with a number of new satellites planned. “We are launching our Satmex 8 satellite next year to replace Satmex 5. The new satellite will have 45 percent more capacity than its predecessor. We expect to have around 70 percent of capacity sold on this satellite by the time it launches.”

While Satmex 8 may help solve some of the operator’s capacity issues, the design process for Satmex 7 is already underway. “We have three orbital slots. All but one of these orbital slots are occupied by our satellites,” said Cabello. “We are planning to launch a new satellite for that orbital slot. This new satellite will be called Satmex 7 and we expect to launch that in the next few years. It will be just one satellite. We are in the design process for Satmex 7 and it will have at least 60 transponders. It is shaping up to be a big satellite.”

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